China adopts a mandatory system of pro rata hiring of disabled persons. According to the PRC Disabled Persons Security Law and the Rules of Employment of Disabled Persons, companies are obliged to hire disabled persons in proportion of no less than 1.5% of their total staff. If any company fails to hire a sufficient number of disabled persons as required by statutory law, it is obliged to make contributions to the disabled persons’ employment security fund. 

In the past, the contribution to the disabled persons’ employment security fund was subject to local regulations. Some locations such as Beijing and Shanghai issued relevant local regulations. Some locations such as Sichuan Province did not do so. 

On 9 September 2015, the PRC Ministry of Finance, the PRC State Tax Bureau and the China Disabled Persons Federation jointly issued the Methods on Levying, Use and Management of Disabled Persons’ Employment Security Fund(“Methods”). These Methods are applicable national wide. Based on the Methods, all companies in the country should make contributions to the disabled persons’ employment security fund if they do not hire a sufficient number of the disabled persons according to statutory law. 

  1. As required by the law, the scale of hiring disabled persons by a company shall be no less than 1.5% of its total staff and the exact proportion applicable to the company shall be subject to the decision of the local government at the provincial level where the company is located. Currently in Shanghai, the proportion is no less than 1.6%. In Beijing, it is no less than 1.7%.
  2. If a company fails to hire disabled persons in the proportion required by the local government where the company is located, the company is obliged to pay contributions to the disabled persons’ employment security fund. However, for calculation of the exact contribution amount, the number of the disabled persons which have been hired by the company will be taken into consideration.
  3. The contribution amount to the disabled persons’ employment security fund payable by a company is calculated as follows: 

Payable amount = (number of total staff of the previous year ✕ rate required by the local government – number of hired disabled persons) ✕ average annual salary of the employees in the previous year 

The total staff of a company refers to the employees who have signed employment contracts with a term of one year or more. In case the company hires employees by seasons, the number of the employees shall be converted to the number on a yearly basis. In case the company uses any seconded employees, such employees shall be included in the total number of the employees.  The average annual salary of the employees of a company shall be calculated on the basis of the total payroll of all staff.

  1. The disabled persons hired by a company may be taken into consideration when calculating the disabled persons’ employment security fund contribution payable by the company if the following circumstances are fulfilled:
    1. A disabled person refers to a person holding a PRC Certificate of Disabled Person which indicates that such person has visual impairments, hearing disabilities, speech disabilities, physical handicaps, intelligence disabilities, mental disabilities or multiple disabilities, or a person holding a PRC Certificate of Disabled Army Man (Grade 1 to Grade 8).
    2. The company shall sign an employment contract with the disabled person for a term of at least one year, pay salary not less than the minimum monthly salary of employees as announced by the local government, and duly and fully pay social insurance and housing fund contributions for the disabled employee according to law.

If a company hires one disabled person holding a PRC Certificate of Disabled Person of Grade 1 or Grade 2 or a PRC Certificate of Disabled Army Man of Grade 1 to Grade 3, it shall be deemed as that the company has hired two disabled persons. Disabled persons hired by the company at the locations other than its registered address shall be counted as well.

  1. A company shall duly make declaration of the status of hiring disabled persons to the competent social security administrative authority every year. If a company fails to make declaration within the prescribed time limit, the company shall be deemed as not hiring disabled employees. In practice, the declaration period varies at different locations. For example, in Shanghai, the declaration period is from 1 July to 31 July of every year. In Beijing, the declaration period is from 1 April to 30 April.
  2. The disabled persons’ employment security fund contribution is levied by the competent local tax bureau on a monthly basis. In practice, it is paid together with the social insurance contributions for the employees either on a monthly basis or in a lump sum once a year, subject to the practice of different locations.

Conclusion

Based on the Methods, in the future, all companies nationwide must either hire disabled persons or pay disabled persons’ employment security fund contributions. The competent social security authority is entitled to make inspection according to law. According to the Rules of Employment of Disabled Persons, if a company neither hires disabled persons nor pays disabled persons’ employment security fund contributions, the competent administrative authority may give warning and ask for rectification within a prescribed time limit. If a company fails to pay the disabled persons’ employment security fund contributions as required by the competent administrative authority, in addition to outstanding payments, the company may be required to pay late payment fees at the rate of 0.5% per day of delay. 

Such policies are aimed at encouraging companies to hire more disabled persons. Instead of paying disabled employees’ employment security fund contributions, a company may consider to hire disabled employees if it has work positions suitable for them.